This paper attempts to examine how the inclusion of economic space affects trade policies and to make a comparison between optimal tariffs with endogenous location and those with exogenous location. In particular, it is shown that the output effect of a tariff change with endogenous location is greater than that with exogenous location if the production function is non‐CRS. Moreover, when the production function is CRS (resp. not CRS), the optimal tariff under endogenous location is the same as (lower than) the one under exogenous location.
Review of International Economies 5(3), pp.324-332